MG Rover Eyes Battery Outsourcing Deal With India Exide - Is US Next?

CALCUTTA November 19, 2003; Dow Jones reported that U.K.-based car maker MG Rover Group Ltd. is exploring the option of outsourcing batteries for its cars to India's biggest automobile battery manufacturer, Exide Industries Ltd. , Exide Chairman S.B. Ganguly said Wednesday.

"Rover has inspected our factories as part of its global outsourcing program. This outsourcing deal is for Rover's own cars and we are very much hopeful about this deal," Ganguly told Dow Jones Newswires in an interview.

But he added that the deal hasn't been "finalized yet," although Exide is already supplying batteries to Rover through local carmaker Tata Motors Ltd., which is exporting its small car Indica to Rover.

The proposed global outsourcing deal with Rover isn't linked to the Tata Motor-Rover arrangement, said Ganguly.

Exide's battery sales in India to auto makers such as Honda Motor Co. and Hyundai Motor Co. have helped the Indian company gain access to developed markets in the West, he noted.

"We are now not just competitive on cost but also on quality," said Ganguly.

Calcutta-based Exide, which has around a 50% share of the $450 million domestic automobile and industrial battery market, is also focusing on submarine batteries to boost its overseas earnings.

"We are now trying to secure orders from Egypt, Algeria Greece and Indonesia," said Ganguly, adding that the company is the only battery vendor for the Indian Navy.

Ganguly said Exide is keen to expand its presence in the European market and has set up a joint-venture company in the U.K. to sell industrial batteries.

"The West is not keen to handle lead, which is a poisonous raw material for the battery industry," said Ganguly. "The West now wants to source batteries from the developing world and this presents us (with) a good opportunity."

He added that the company will increasingly focus on markets in Europe and might not look aggressively at the world's fastest-growing car market, China.

"Exide is focused on profit margins and we aren't looking merely at volume growth," said Ganguly. "China is a good volume growth story but is very competitive."

Exide is selling some batteries in China through its marketing venture based in Singapore, said Ganguly, adding that exports often fetched lower margins than domestic sales because of "dumping" by some manufacturers.

Ganguly said Exide's exports are likely to grow as much as 71% on year to 600 million rupees ($1=INR45.58) in the current financial year ending March 2004 on higher sales of industrial batteries in Australia, Europe and Japan.

"Over the medium term, our aim is to make exports contribute around 8% of our annual sales," said Ganguly.

In the financial year ended March 2003, exports accounted for 3.7% of Exide's total sales of INR9.24 billion.